Question

Thermal Rising, Inc., makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management has designed an activity-based costing system with the following activity cost pools and activity rates: Activity Cost Pool Activity Rate Supporting direct labor $ 20 per direct labor-hour Order processing $ 196 per order Custom design processing $ 258 per custom design Customer service $ 426 per customer Management would like an analysis of the profitability of a particular customer, Big Sky Outfitters, which has ordered the following products over the last 12 months: Standard Model Custom Design Number of gliders 13 2 Number of orders 2 2 Number of custom designs 0 2 Direct labor-hours per glider 27.50 32.00 Selling price per glider $ 1,750 $ 2,390 Direct materials cost per glider $ 470 $ 582 The company’s direct labor rate is $22 per hour. Required: Using the company’s activity-based costing system, compute the customer margin of Big Sky Outfitters. (Round your intermediate calculations and final answer to the nearest whole dollar amount. Loss amounts should be entered with a minus sign.)

Answer 1

Answer-

CUSTOMER MARGIN- BIG SKY OUTFITTERS
USING ACTIVITY BASED COSTING METHOD
PRODUCTS		TOTAL
		$
Sales Value	($1750*13 gliders)+($2390*2 gliders)	27530
Less:-Costs
Direct materials	($470*13 gliders )+($582*2 gliders)	7274
Direct labor	{(27.50 hours*13 gliders)*$22 per hours}+(32.00 hours*2 gliders*$22 per hour)	9273
Supporting direct labor	{(27.50 hours*13 gliders)*$20 per hours}+(32.00 hours*2 gliders*$20 per hour)	8430
Order processing	(2 order+2 order)*$196 per order	784
Custom design processing	2 design*$258 per dsign	516
Customer service	1 customer*$426 per customer	426
Total costs		26703
Customer margin		827